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Will the beasts rise?: Banks and the Finetech Startups

The truth is, oil is still king. I understand that you’re in haste to coronate innovation but until you disrupt, the holy book commands that you must be honest in all your doings.

It’s amazing how we skip process in Africa, we just jump on revolution. That’s the truth, you’re angry? the narrative is wrong? bruh, I kid you not, it’s our attitude. My parents told me stories about how during the good old days, you had to go pick a numbered tag very early in the morning at Union Bank Marina (Nigeria) then come back later for your money (patience really is a virtue honestly).

But then we’ve moved on, just like the vision of a global church, there are now banks in every 5 minute working distance. 20th century automated transaction machines have littered everywhere and Africans are now open to the idea. The banks are even doing more, partnering and creating conscious social initiatives as ways of giving back even if I think they’ve done more harm than good (thoughts are mine).

Lately, there’s been a shift in the way we do things. We’ve become a tech savvy continent (or we’re headed there), the big decline in oil prices has already had a severe impact on the continent. Even countries less dependent on the export of raw materials are enduring the headwinds of the commodities price decline.

So we’ve buckled up and are doing new things: integrating tech with culture and it’s working. We can’t ignore how the revolution is tackling money, Fintech – short for Financial Technology is on the rise. Over the past two years, startups focusing on payments technology have been springing up, right and down. I mean, we now buy bitcoins and also do online pyramid scams, schemes I meant. Fintech is certainly upending many different niches in finance, kids are now raising millions of dollars in venture capital to disrupt the sector and its amazing.

Look at how Paga, MPesa, Flutterwave, Paystack, BitPesa, Branch, Snapscan and the likes are bringing the new light. Sending money is now as easy as sending WhatsApp broadcasts. Like never before, online merchants are flourishing because some people have taken it upon themselves to fix what has always been broken- payments and it’s exciting!

Certainly, the banks are getting pressured, even though these startups are still tiny, they respect the audacity. There’s sentiment in some corners of the market that Fintech can and will sound the death knell for traditional banks. However when considered in greater context, we see that these very same banks, through strategic acquisitions and partnerships, may put a stop to even the more cutting-edge technology solutions playing a major disruptive role.

I’m a tech enthusiast, I love to jump on ‘new’ but I love the truth too. Are banks likely to disappear? I think the fuck not. They get the plight, they aren’t sleeping too, look well and you’ll observe how ‘old drunken big belly uncles’ are pulling forces together with tech collectives to also play the cards even if I feel they don’t get it (a case study on WEMABANK’s ALAT) and I also gauged what Zenith Bank did with Cregital recently.

Many banks have failed miserably in technology offerings for their customers, either being extremely slow to release new platforms, or producing solutions that are clumsy, clunky and in some cases simply unworkable for the user. What does this mean? Innovators and disrupters have a damn good platform to enter the fray and take a slice of the pie. The banks are vulnerable and they know it. I had a discussion with one of the founders of a Nigerian bank and he expressed his fears, he doesn’t even understand what the uproar is about. ‘Who are the best developers around?’, he asked. Man thinks it’s about getting them to clone these apps and dump it on customers.

This is what differentiates the fin-tech startups, they have a thorough understanding of the market, they’re entrenched in the demographics. They know big brothers’ mistakes and are leveraging on it, they didn’t play chess for nothing. And this is where we are starting to see genuine incremental innovation and disruption and I must admit (again) just how exciting this is.

Banks are big! talmbout bullion vans and high rise offices. The sector is well established and protected that challenging it as a whole from the outside is an unwinnable battle. We know well enough to never say never, but it’s reasonable to assume that the likelihood of a startup posing a serious, life changing threat to our largest banks is low. They can acquire these startups at any time or at least dub them (exactly what they are doing), that’s why ALAT will spend millions to call themselves ‘Nigeria’s first digital bank’ but I mean; they gave us one of the continent’s biggest artiste and free food in one night so who are we to take an action (?).

Even Central banks are making the process of handling transactions hard for the new guns. I remember when I was invited for a creative session that was meant to develop ideas for a new payments company but after reading the regulations in place and other requirements, I left Lekki that day reassuring myself that I’m young so therefore I don’t need any stress. The tenacity and patience to navigate prehistoric and often frustrating internal politics of the banking world is the tallest wall for startups that want to infiltrate.

Plot twist, let’s say that if fin-tech doesn’t kill banks, it might instead sap the sector’s profitability. Gauge International transactions, the kids have the edge- many banks have been unable to run foreign payments/subscriptions as a result of economic downturns but the guys at Flutterwave came through with BatterCards and this was possible because of their foreign allegiances, this and many more.

One thing you can’t dispute, banks have ingrained advantages, and they do some things remarkably well, like the current account,l- which allows people to store money in a way that keeps it safe and permanently accessible. Few startups want to take on that heavily regulated bit of finance. Many even admit they depend on it: after all, you need a bank account to use most fintech services 😉

Now, if the banks flock to fin-tech startups for ancillary services or the startups keep riding on the influence of the banks– will there likely be a war? if yes, who wins or maybe we’re even exaggerating scales and things will be normal? well? Let’s just say that all these are billion dollar questions the future will answer, we’ve only seen the beginning.